The morphogenesis of alveolar septa in sheep lung was studied by means of light microscopic, electron microscopic and immunohistochemical techniques. The concept is presented that alveolar septa develop from primordia which first develop as groups of fibroblasts in the area subjacent to the epithelium and are associated with elastic fibers and collagen fibers; these structures undergo a complex process of differentiation of cells and of organization of connective tissue. Immunohistochemical staining for elastin provided a very useful technique to follow this process.